Friday, January 12, 2018

Do We Need Failure Stories As Much As We Need Success Stories?

SeeWhy success storiesare just propaganda by Martin Weigel. I might not agree with all of this, but it raises important issues. Looking at successful companies and realizing they did X, Y or Z, does not mean X, Y or Z caused their success. We might not know how many companies that did X, Y or Z failed. Maybe only 10% of companies that did X, Y or Z succeeded. Excerpt:

"The problem with success stories is that
they are not stories about failure. And thus by their very nature, they
are distortions. At this point briefly retelling a familiar story about
World War II is obligatory.

The story goes that during World War II,
the statistician Abraham Wald was tasked with helping the Allies reduce
the number of bombers lost to enemy anti-aircraft fire. The Allies
wanted to understand how much additional protection was needed. The
challenge was not straightforward. Armour would make the bombers
heavier, less manoeuvrable, and less fuel-efficient. But armouring the
bombers too little would leave them vulnerable. Examining
the bombers that did make it back, the Allies had noted that that the
damage wasn’t uniformly distributed across the aircraft. Since there
were more bullet holes in the fuselage than in the engine, the Allies
concluded that this is where they should concentrate the armour. The
question they had for Wald was how much armour.

Wald did not answer their question.
Instead he argued that the armour shouldn’t go where the bullet holes
were – it should go where the bullet holes were not, namelyon the engines. This argued Wald, was where the bombers were most vulnerable and where the planes that didn’t make it back had been hit.Returning planes with damage to the fuselage simply showed that this damage could be survived. From
this insight, Wald then calculated how much damage each individual part
of an airplane could take before it was destroyed and how likely it was
that the average plane would get shot in those places in any given
bombing run depending on the amount of resistance it faced.

Wald’s achievement lay in the fact that
unlike his superiors, he did not focus exclusively on the survivors. He
avoided what we call ‘survivorship bias’ and instead found a way of
seeing the bombers that did not make it back and the bullet holes that were missing. The
lesson of this story of course is that focusing exclusively on
survivors creates a very distorted reality. As advertisers have long
known, focusing exclusively on say, the successful lottery winner or the
successful weight loser not only obscures quite how hard success really
is to achieve, but all too easily oversimplifies or misrepresents the
real reasons behind success.

Take the consultants Collins and Porras authors of the bestselling book Good To Great: Why Some Companies Make the Leap…and Others Don’t.To
get to their recipe for success, Collins and Porras identified 200
leading companies then narrowed them down to include the best and most
durable and successful. This was achieved by identifying the twenty
organizations most frequently mentioned in a survey of CEOs. Companies
founded after 1950 were eliminated and the list culled down to eighteen
“visionary” companies (alarm bells should already be ringing at this
point). They then looked at the common traits of these companies and
compared them with companies that were just “good”. Lo and behold their
research revealed that the great companies had a strong core ideology,
built a strong corporate culture, set audacious goals, developed people
and promoted from within, created a spirit of experimentation and risk
taking, and drove for excellence.

“Just about anyone can be a key
protagonist in building an extraordinary business institution” Collins
and Porras promised, “the lessons of these companies can be learned and
applied by the vast majority of managers at all levels. You can learn
them. You can apply them. You can build a visionary company.” But in
truth their analysis tells us nothing. Other than we are suckers for
good story.

After all, as Phil Rosenzweig notes in his wonderful take down of business delusions The Halo Effect,
it would be remarkable if great companies were not described in these
terms – and if good companies in somewhat lesser terms. And because we
know absolutely nothing about all the other companies that were neither
Good nor Great, we have absolutely no way of knowing if these factors
are the drivers of success, or merely ways of describing a successful
company.

As Rosenzweig points out, picking a
handful of companies precisely because they’ve done well for many years,
and then looking back in time and ‘explaining’ what happened tells us
absolutely nothing about what makes for success. If they had concluded
that having a blue logo was the key factor in their extraordinary
performance or that the CEOs were all Virgos it would have had just as
much plausibility.

There is then, nothing like a success
story to obscure the real nature of success. The success story of Ryan
Gosling renders us blind to every struggling or failed actor waiting on
tables, just as the success story of Ryan Higer obscures the unsurfaced
and unremarked content produced by a thousand YouTube creators, just as
the success story of Chance the Rapper leads us to forget the legions of
undiscovered performers toiling in the unknown loneliness of their
bedroom. Their stories and accomplishments may well provide hope and
comfort and inspiration for those who struggle. But they also
misrepresent quite how hard success is to come by. And indeed how it is
achieved. As David McRaney puts it:

Survivorship bias… flash-freezes your
brain into a state of ignorance from which you believe success is more
common than it truly is and therefore you leap to the conclusion that it
also must be easier to obtain. You develop a completely inaccurate
assessment of reality thanks to a prejudice that grants the tiny number
of survivors the privilege of representing the much larger group to
which they originally belonged.”

***

In reducing their achievements down to a single factor, those who tell their stories of success invariably claim (or believe) tohave
had a monopoly of control of events and outcomes, and vastly exaggerate
their agency. Yet no person, no organisation, no business functions in
isolation from the environments and contexts they are located within.
Any story of success is a story of a complex interaction offactors.
Reducing that complexity to a single variable or a simple aphorism
might make for good storytelling, but it is usually an exercise in
nonsense.

Jim Stengel in his book Grow: How Ideals Power Growth and Profit at the World’s Greatest Companies for
example, wants us to believe that companies with an ideal at their
heart see share price growth far in excess of those lacking such values.

This conclusion was arrived at by taking
the 50 brands with the highest loyalty or bonding scores from Millward
Brown’s 50,000-strong database, searching for a link between them – a
‘Brand Ideal’ – and then looking at the chosen brands’ stock value
growth between 2000 and 2011. Since the these
fifty brands had grown by 393% compared with a -7% loss for the S&P
500 benchmark – and ignoring the massively complex array of interrelated
variables and dynamics that constitute a business – Stengel declared that having an ideal was the key to driving stratospheric business success.

One has to applaud the audacity of the
argument. Yet for Stengel’s argument to have a shred of credibility, one
would have had to a) have eliminated all the other factors that
might have impacted growth before aligning upon Brand Ideal and b)
demonstrated that successful companies have brand ideals more often than
unsuccessful ones. Stengel’s analysis does neither.

But why should the burden of rigorous
analysis get in the way of seductive story? People get away this kind of
sloppy half-baked stuff because we’d rather hear a story about purpose
than interrogate the assumptions made in the analysis or consider that
Stengel’s analysis looks at but 50 companies out of a database of
50,000. We’re so dazzled by the mere presence of numbers that we gush
about about the “scientist’s rigour” of the author’s analysis. Even
Chairman of WPP Sir Martin Sorrell is not immune to a good yarn,
declaring that Stengel had “the hard, clean numbers to bear his
teachings out”. As Professor Kahneman puts it:

The exaggerated faith in small samples
is only one example of a more general illusion – we pay more attention
to the content of messages than to information about their reliability,
and as a result end up with a view of the world around us that is
simpler and more coherent than the data justify. Jumping to conclusions
is a safer sport in the world of our imagination than it is in reality.”"